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In many ways, there has been a changing of the guard on Wall Street over the past several years. The transition from on-the-floor traders to algorithm-based digital trading has been well-documented, and even our preferred methods for determining value and growth potential have changed.

With that said, one of the most polarizing new trends on the stock market relates to the use of traditional valuation metrics on tech stocks—or the lack of use, I should say. For better or worse, investors are quick to disregard old-school methods like the P/E ratio in favor of heavy optimism about the future.

Interestingly enough, according to our Zacks Sector Rank data, the broad “Computer and Technology” sector has an average P/E ratio of 21.08, which is significantly “worse” than the S&P 500 average of 17.22.

Of course, a lot of this comes with the territory and is direct result of exposure to certain market conditions that are unique to tech companies. However, that does not mean we cannot have a little fun with it. Check out these three popular tech companies with ridiculous P/E ratios:

A leader in domain name licensing, GoDaddy skyrocketed to fame thanks to a series of raunchy TV commercials that had very little to do with its business. Regardless, the company is good at what it does. GoDaddy has only recently cemented consistent profits, but investors were willing to pay more for an industry-dominating internet stock with exciting growth prospects. Looking ahead, the company is expected to improve its earnings at an annualized rate of 20% over the next three to five years, so investors should expect this valuation to become less stretched over time.

HubSpot is a fast-growing inbound marketing software company that went public in late 2014. This is another example of a young tech firm with a great product that only recently became profitable on a non-GAAP basis. HubSpot’s platform is a top choice in the marketing field, so it is no surprise to see investors “over pay” for the stock with that dominance in mind. Going forward, HubSpot should emerge as a big data and AI play, which could lead to even more speculative trading. Still, our consensus estimates are calling for the company’s EPS figures to improve by 60% in the current fiscal year and an additional 78% next year.

This game-changing mobile payments firm has solidified its place as one of Wall Street’s favorite growth stocks over the past year or so, but as is the case with most tech growth picks, Square has an apparently-stretched valuation right now. Square has only recently started to turn non-GAAP profits, which has inspired even more investors to jump on the stock. Shares of SQ have skyrocketed more than 190% over the last 52 weeks alone. And Square’s earnings growth is expected to come quickly. The company’s Forward P/E is a slimmed-down 93.70, so its valuation is clearly improving.

Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!

Don’t Even Think About Buying Bitcoin Until You Read This

The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.

Zacks has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.99% per year. These returns cover a period from January 1, 1988 through December 3, 2018. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

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